This administration recently started a trade war by killing at the behest of the Teamsters union a pilot program that allowed a minuscule number of Mexican trucks to compete for hauling cargo in the U.S. (a right granted them under NAFTA). In retaliation, the Mexicans have started placing tariffs on our goods.

Brewing now is a second trade war. Canadians are about as mad as those legendarily pacific people can be at the “buy American” measures placed into the $787 billion stimulus bill Obama signed in February.

Those protectionist measures were criticized by the Canadians at the time, but Obama mollified the Canadians by putting in the bill a clause that said nothing in it would take precedence over existing U.S. trade agreements, and by promising – during his trip to Canada in February – to avoid protectionism.

But as the Canadians are discovering, Obama is the master of the rhetorical head fake – denying with a straight face the very thing he is doing or intending to do. The provisions in the stimulus bill are, indeed, excluding Canadian companies from competition. While many federal contracts in the stimulus bill are still open to Canadian bidders, most of the state and local contracts ($280 billion worth) are now closed to Canadians. Since the contracts the Canadians are excluded from are technically for state and municipal work, by that technicality the bill doesn’t violate existing trade agreements.

Indeed, the feds say that state and local construction jobs even partially funded by federal money must utilize only American companies. As a result, for example, Hayward Gordon, a Canadian pump manufacturer, had its sales to various American cities simply cut off.

The usual excuse for these protectionist games is that cheap labor in foreign sweatshops is unfair competition to our workers. But that hardly applies to Canada, where workers are paid roughly what ours are.

The Canadians are beginning to fight back. In the province of Ontario, a group of cities have devised their own measures to ban our companies from bidding on their municipal projects.

This is a perfect illustration of what the classic economist Frederic Bastiat called “the seen and the unseen.” American protectionists see the jobs “saved” when Canadian companies are blocked from competing for contracts here but don’t see the American jobs lost when our companies aren’t allowed to compete in the Great White North.

Of course, when our countries stop each other from competing, the problem isn’t merely that nobody gains jobs but, worse, that everybody loses wealth. By blocking the Canadian company that can sell a pump for $50 to protect an American one who makes it for $90, we are out $40. And when the Canadians block an American company that can sell a thermostat for $50 to protect a Canadian company that makes it for $90, they lose $40.

In short, these protectionist wars don’t increase employment, they only reduce wealth.

This trade war, like the one with Mexico, is just starting. Obama is pushing the idea of dramatically increasing taxes on U.S. companies that employ workers abroad. Congress has attached “buy American” provisions to a recent bill for construction of clean-water projects, and to one for construction “environmentally friendly” schools. Moreover, Congress is looking at a proposal to buy 100,000 hybrid cars, but only ones made in America – presumably at our newly nationalized auto companies – and is also considering requiring federal agencies to only use domestic steel.

The Canadians and, I daresay, many other countries, will simply start enacting such measures of their own. This will have the effect of making our recession deeper and longer, just as the Smoot-Hawley tariffs enacted at the beginning of the Great Depression did then.